Aequs Ltd IPO 2025: Should You Invest in India’s Aerospace Precision Manufacturing Pioneer?

Executive Summary

Aequs Ltd., a 25-year-old precision component manufacturer for aerospace giants like Boeing and Airbus, is launching a ₹921.81 crore initial public offering (IPO) in December 2025. Despite serving high-barrier entry markets with strong relationships with global aerospace leaders, the company remains loss-making with a net loss of ₹102.35 crores in FY25. This comprehensive analysis examines whether this aerospace manufacturing IPO deserves a place in your portfolio.

Quick Verdict Box:

• For Listing Gains: SUBSCRIBE (Moderate institutional interest, lower valuations vs peers)
• For Long-term Investment: WAIT & WATCH (Monitor profitability trajectory, debt reduction progress)
• Risk Level: HIGH (Loss-making, high debt dependency, concentrated customer base)

🎯 Aequs IPO Key Highlights at a Glance {#aequs-ipo-key-highlights}

Lead Managers

• JM Financial Ltd
• IIFL Capital Services Ltd
• Kotak Mahindra Capital Co. Ltd

Registrar

• Kfin Technologies Ltd

🏢 Company Overview: Understanding Aequs Limited

The Genesis Story

Incorporated in 2000, Aequs Ltd has evolved from a training company into one of India’s leading precision manufacturing enterprises. Headquartered in Bengaluru, the company operates a Special Economic Zone (SEZ) offering fully vertically integrated manufacturing capabilities primarily for the aerospace sector.

What Does Aequs Manufacture?

Aequs specializes in precision-engineered components for mission-critical applications. Their product portfolio includes:

Aerospace Segment (89% Revenue – FY25)

1. Engine Systems Components
   • Housing assemblies
   • Manifolds and mounting flanges
   • Actuator pistons
   • Jack heads and radarbox components
2. Landing Systems
   • Main landing gear assemblies
   • Main fittings and bracket assemblies
   • Wheel rims and half wheels
   • Uplock mechanisms
3. Aircraft Structures
   • Brackets and corner fittings
   • Wing flap supports
   • Cable quadrants
   • Gearbox brackets and floor boards
4. Cargo & Interiors
   • Power distribution unit trays
   • Side panels and seat assemblies
   • Panel structures and housing components

Consumer Segment (11% Revenue – FY25)

• Cookware for premium brands (Tupperware)
• Toys and action figures (Hasbro, Spin Master)
• Consumer electronics components
• Precision plastic products

Manufacturing Footprint

Aequs operates three integrated manufacturing clusters across continents:

• India: Primary manufacturing hub with end-to-end capabilities
• France: Strategic presence near Airbus facilities
• United States: Proximity to Boeing and major OEMs

This multi-geography strategy ensures supply chain resilience and faster response times to customer requirements.

💼 Business Model: The One-Stop Manufacturing Solution

Competitive Advantages

1. Vertically Integrated Operations

Unlike competitors who specialize in single processes, Aequs offers complete manufacturing solutions under one roof:

• Forging: Initial metal shaping
• Precision Machining: High-tolerance finishing
• Surface Treatment: Corrosion resistance and durability
• Assembly: Final product integration
• Testing & Quality Control: Aerospace-grade certifications

This integration reduces lead times from 8-9 months and eliminates coordination challenges with multiple suppliers.

2. High Entry Barriers

The aerospace industry demands:

• Stringent quality certifications (AS9100, NADCAP)
• Multi-year qualification processes
• Proven reliability track records
• Substantial capital investments
• Technical expertise in tight-tolerance manufacturing

Once qualified, suppliers enjoy sticky customer relationships with high switching costs.

3. Blue-Chip Customer Base

Aequs serves as a Tier-1 supplier to:

• Airbus: A220, A320, A330, A350 programs
• Boeing: B737, B777, B787 programs
• Major aerospace OEMs and system integrators

As of September 2025, the company manufactures over 5,000 products across various aircraft platforms.

4. Scale and Specialization

• 1,892 full-time employees
• 1,834 contractual employees
• 432 apprentices (skill development pipeline)
• Advanced CNC machining centers
• Automated forging and treatment facilities

📈 Financial Performance Analysis

Revenue Trends (Consolidated – ₹ Crores)

Key Financial Observations

Revenue Dynamics

1. Aerospace Segment Growth: Despite overall revenue decline, aerospace revenue grew ~9% YoY in FY25
2. Consumer Segment Contraction: Major customer (Hasbro) order reduction led to segment shrinkage from 28% to 11%
3. Business Mix Improvement: Higher contribution from high-margin aerospace offsets low-margin consumer products

Profitability Challenges

Critical Insight: While EBITDA is positive and improving (11.7% consolidated, 20-25% in aerospace division), the company remains loss-making due to:

• High Depreciation: Capital-intensive machinery requires substantial depreciation charges
• Interest Costs: Working capital financing for 8-9 month conversion cycles
• Consumer Segment Losses: Legacy consumer business drags overall profitability

Balance Sheet Health

Debt Management: Company’s debt-to-equity ratio of 0.62x is manageable for a manufacturing enterprise, though the working capital cycle creates cash flow pressures.

Return Metrics

• ROE: -14.30% (Loss-making)
• ROCE: 0.87% (Barely positive)
• RoNW: -14.47% (Negative returns)

💰 IPO Fund Utilization: Where Your Money Goes

Objects of the Issue

Analysis of Fund Deployment

✅ Positive Aspects

1. Debt Reduction Priority: 64.7% allocation to debt repayment will:
   • Reduce interest burden (improving PAT)
   • Strengthen balance sheet
   • Lower financial risk
   • Improve credit ratings
2. Strategic Capex: ₹64 crores for machinery indicates:
   • Capacity expansion for growing aerospace orders
   • Technology upgrades for precision manufacturing
   • Operational efficiency improvements
3. Financial Flexibility: General corporate purposes allocation provides working capital cushion for the long conversion cycle business

⚠️ Concerns

1. Limited Growth Capex: Only 9.6% for capacity expansion seems modest given industry growth potential
2. Subsidiary Focus: Major debt in consumer products subsidiary (₹231 Cr) – a loss-making segment
3. No R&D Allocation: Technology-intensive business needs continuous innovation investment

🎯 Investment Thesis: Why Consider Aequs IPO?

✅ Reasons to Invest (Bull Case)

1. Massive Industry Tailwinds

Global Aerospace Market Growth:

• Current Size: $132 billion (2025)
• Projected Size: $235 billion (2030)
• CAGR: 10% per annum

Drivers:

• Post-COVID aviation recovery
• Rising middle-class travel in Asia
• Aircraft fleet modernization
• Increased defense spending globally
• “Make in India” aerospace initiatives

2. Strategic Positioning in High-Barrier Industry

• Tier-1 supplier status with Boeing and Airbus
• Multi-year qualification provides moat
• Complex certifications create competitive advantage
• Sticky customer relationships with high switching costs
• 70% revenue from top 5 customers shows trust

3. Improving Business Mix

• Aerospace contribution increased from 72% (FY23) to 89% (FY25)
• Consumer segment de-risking (from 28% to 11%)
• Aerospace EBITDA margins: 20-25% vs consolidated 11.7%
• Potential profitability as consumer segment shrinks

4. Margin Expansion Potential

Post-IPO Scenario:

• Debt reduction → Lower interest costs
• Operating leverage → Better EBITDA conversion
• Aerospace focus → Higher margin product mix
• Capacity utilization → Improved efficiency

Estimate: PAT could turn positive in FY26-27 with debt reduction and revenue growth

5. Defense Manufacturing Opportunity

• Company entering defense precision components
• Existing aerospace expertise transferable
• Government’s defense indigenization push
• Lower demand volatility vs commercial aerospace
• Long-term contracts with stable revenues

6. Founder-Led Management

• Promoter: Aravind Melligeri (experienced entrepreneur)
• Founder-driven vision and execution
• Long-term commitment (post-IPO holding TBD)
• Technical expertise in precision manufacturing

7. Reasonable Valuation (Relative)

Price-to-Book Comparison (at upper price band):

While not cheap, Aequs trades at a discount to pure-play electronics manufacturers like Dixon and Kaynes, though comparable to aerospace peer Azad Engineering.

8. Export-Focused Revenue

• Majority revenue from exports (USD-denominated)
• Natural hedge against rupee volatility
• Access to global aerospace supply chains
• Quality standards aligned with international norms

⚠️ Reasons to be Cautious (Bear Case)

1. 25 Years Without Profitability

Critical Red Flag: Despite being established in 2000, Aequs remains loss-making:

• FY23 PAT: -₹109.50 Cr
• FY24 PAT: -₹14.24 Cr
• FY25 PAT: -₹102.35 Cr

Questions Raised:

• Why hasn’t scale translated to profitability?
• Are business fundamentals structurally challenged?
• Can IPO proceeds actually turn the tide?

2. Negative Return on Equity

• ROE: -14.30%
• ROCE: 0.87% (barely positive)
• Shareholders have not earned positive returns historically
• Capital allocation efficiency questionable

3. Working Capital Intensive

• 8-9 month conversion cycle from order to payment
• Continuous working capital financing needed
• High interest burden impacts profitability
• Cash flow negative despite positive EBITDA

4. Customer Concentration Risk

• 70% revenue from top 5 customers
• Heavy dependence on Boeing and Airbus
• Aerospace industry cyclicality exposure
• Single customer loss could be devastating

5. Industry Cyclicality

Aerospace Sector Risks:

• Economic slowdowns reduce air travel
• Aircraft order cancellations/delays
• Geopolitical tensions impact defense spending
• Supply chain disruptions (as seen during COVID)

6. Consumer Segment Performance

• Despite 25 years, consumer business remains loss-making
• Hasbro order reduction led to revenue collapse
• Low margins in toys and cookware
• Management execution concerns

7. High Debt Despite IPO

Even after ₹433 Cr debt repayment:

• Residual debt remains
• Debt-to-Equity improves but doesn’t eliminate
• Interest costs continue (though reduced)
• Financial leverage persists

8. Competitive Landscape

India Aerospace Manufacturing:

• Growing competition from established players
• New entrants attracted by industry growth
• Pricing pressures in global supply chains
• Technology disruption risks

9. Valuation Concerns

P/B of 9.94x for a loss-making company raises questions:

• No earnings to justify Price-to-Earnings
• Book value may not reflect true asset quality
• Premium pricing for uncertain profitability

10. Execution Track Record

• Slow revenue growth (3% CAGR FY23-25)
• Multiple business pivots historically
• Consumer segment missteps
• Profitability timeline uncertain

🔍 Peer Comparison: How Does Aequs Stack Up?

Key Competitors Analysis

Azad Engineering Ltd

• Focus: Aerospace & defense forgings
• Status: Profitable, positive PAT
• Margin: Better EBITDA margins
• Growth: Consistent revenue trajectory
• Valuation: P/B ~8-10x

Dixon Technologies

• Focus: Consumer electronics manufacturing
• Status: Highly profitable
• Growth: 40%+ revenue CAGR
• Margin: 15%+ PAT margins
• Valuation: P/B ~15-20x (premium justified)

Kaynes Technology

• Focus: Electronics manufacturing services
• Status: Profitable growth story
• Growth: 35%+ revenue CAGR
• Margin: Strong double-digit PAT
• Valuation: P/B ~12-15x

Aequs Positioning: Among peers, Aequs is the only loss-making entity but commands a P/B of 9.94x, suggesting market is pricing in future profitability turnaround.

📊 Valuation Metrics Deep Dive

Pre-IPO vs Post-IPO Metrics

Is the Valuation Justified?

For P/B of 9.94x to be justified, investors need:

1. Clear path to profitability within 2-3 years
2. Sustained aerospace revenue growth (15%+ CAGR)
3. EBITDA margin expansion to 15%+ consolidated
4. Successful debt reduction improving PAT
5. Defense segment revenue contribution

Without above triggers, current valuation appears optimistic.

🎲 Risk Assessment Matrix

💡 Who Should Invest in Aequs IPO?

✅ Suitable For:

1. Risk-Tolerant Investors: Comfortable with turnaround stories
2. Long-Term Horizon: 3-5 year investment perspective
3. Sectoral Believers: Bullish on India aerospace growth
4. Portfolio Diversifiers: Seeking aerospace exposure
5. HNI/Institutional Players: Can absorb volatility

❌ Not Suitable For:

1. Conservative Investors: Seeking stable, profitable companies
2. Short-Term Traders: Uncertain listing gains
3. Risk-Averse Retirees: Negative cash flows concerning
4. Income Seekers: No dividend visibility
5. Capital Preservation Focus: Principal protection not assured

🎯 Expert Recommendation

Our Rating: NEUTRAL TO CAUTIOUSLY POSITIVE ⭐⭐⭐☆☆

For Listing Gains Perspective (Short-Term)

Rating: SUBSCRIBE 🟢

Rationale:

• Moderate to strong institutional interest expected
• Aerospace theme attracts investor attention
• Post-COVID aviation recovery narrative
• IPO supply-demand dynamics may favor listing pop
• Grey market premium (if any) suggests interest

Suggested Approach: Apply for 1-2 retail lots for listing gains

For Long-Term Investment (3-5 Years)

Rating: NEUTRAL 🟡

Rationale:

Positives:

• ✅ Industry growth tailwinds (10% CAGR)
• ✅ High entry barrier business
• ✅ Blue-chip customer base
• ✅ Debt reduction improving financials
• ✅ Improving business mix (aerospace focus)

Negatives:

• ❌ 25 years without profitability
• ❌ Negative ROE and ROCE
• ❌ Working capital intensive
• ❌ Execution track record concerns
• ❌ Stretched valuation for loss-making entity

Suggested Approach:

• Conservative Investors: AVOID or wait for post-listing clarity
• Aggressive Investors: Consider 1-2% portfolio allocation
• Monitor Triggers: Q1 FY26 results, debt reduction progress, aerospace order book

📋 Investment Decision Framework

Before Applying, Ask Yourself:

1. Financial Health Check

• ✅ Have surplus funds beyond emergency corpus?
• ✅ Can hold for 3+ years if listing disappoints?
• ✅ Comfortable with potential 20-30% downside?

2. Portfolio Fit

• ✅ Need aerospace sector exposure?
• ✅ Have other high-risk growth stocks?
• ✅ Portfolio diversification adequate?

3. Expectations Clarity

• 🎯 Listing gains focus? (Apply 1-2 lots)
• 🎯 Long-term wealth creation? (Need conviction)
• 🎯 Sectoral bet? (Compare with Azad Engineering)

4. Risk Tolerance

• ⚠️ Can handle negative surprises?
• ⚠️ Comfortable with loss-making companies?
• ⚠️ Patient for turnaround (2-3 years)?

🔮 Future Outlook & Triggers to Monitor

Positive Triggers (Upside Catalysts)

1. Profitability Milestone: First profitable quarter post-IPO
2. Major Contract Wins: New Boeing/Airbus program awards
3. Defense Orders: Government defense manufacturing contracts
4. Margin Expansion: Consolidated EBITDA crossing 15%
5. Debt Elimination: Achieving debt-free status
6. Revenue Acceleration: Aerospace revenue growth >15% YoY
7. Consumer Exit: Complete exit or turnaround of consumer business

Negative Triggers (Downside Risks)

1. Continued Losses: No path to profitability in FY26-27
2. Customer Loss: Any top-5 customer attrition
3. Margin Compression: EBITDA margins declining below 10%
4. Debt Increase: Working capital needs increasing debt again
5. Industry Slowdown: Global aerospace demand downturn
6. Execution Failures: Missed capacity utilization targets
7. Cash Burn: Negative operating cash flows persist

❓ Frequently Asked Questions (FAQs)

📌 Key Takeaways for Investors

✅ Investment Checklist

🎯 Final Verdict Summary

Aequs IPO presents a classic “turnaround story” in a high-growth industry. While the 10% CAGR aerospace market growth, blue-chip customer base, and high entry barriers offer compelling long-term potential, the 25-year track record without profitability and negative returns on equity are serious red flags that cannot be ignored.

Our Balanced View:

• Listing Gains: Worth a speculative application (1-2 lots)
• Long-Term Investment: Requires strong conviction and risk appetite
• Conservative Approach: Wait for 2-3 quarters post-listing to assess execution

Investment Strategy:

• Aggressive Investors: 1-2% portfolio allocation
• Moderate Investors: Wait and watch approach
• Conservative Investors: Better opportunities available

Remember, past performance and current losses don’t guarantee future results—neither success nor failure. Make informed decisions based on your financial goals, risk tolerance, and investment horizon.

📞 Important Information & Disclaimer

Aequs Limited Contact Details

Corporate Office: Aequs Tower, No. 55, Whitefield Main Road, Mahadevapura Post, Bengaluru, Karnataka – 560048

Phone: +91 96 3205 8521
Email: investor.relations@aequs.com
Website: www.aequs.com

IPO Registrar Details

Kfin Technologies Ltd
Phone: 040-6716 2222, 040-7961 1000
Email: aequs.ipo@kfintech.com
Website: ipostatus.kfintech.com

How to Check Allotment Status Of Aequs Ltd IPO

Visit Kfin Technologies’ IPO status page or registrar website using your PAN/Application number after allotment date (Dec 8, 2025).

📢 Disclaimer

This article is for educational and informational purposes only and should not be construed as investment advice. The author and publisher:

• Are not SEBI registered investment advisors
• Do not have any positions in Aequs Limited
• Have prepared this analysis based on publicly available information
• Cannot guarantee accuracy of all data points
• Are not liable for any investment decisions or losses

Please note:

• IPO investments carry market risks
• Past performance is not indicative of future results
• Investors should read the Red Herring Prospectus (RHP) carefully
• Consult with a certified financial advisor before investing
• Invest only surplus funds you can afford to lose
• This is not a buy/sell recommendation

Investment decisions are solely your responsibility. Do your own due diligence.

📚 Additional Resources

• Red Herring Prospectus (RHP): Available on BSE/NSE websites
• SEBI SCORES: For investor complaints (scores.gov.in)
• Company Financials: BSE/NSE filings section
• Peer Comparison: Azad Engineering, Dixon Technologies annual reports

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